Category: Current Financial Affairs

Financial Awareness for RBI Grade B- 4 August 2017

Retail banking may lose 55% of business to Fintech: report (Source: MINT)

The retail banking sector could lose up to 55% of its business to fin-tech firms if it does not up to the ante in terms of investment in digital transformation, according to a study titled ‘Enterprise Digital Transformation: Evaluating Indian Enterprises’, by research firm Frost & Sullivan and software lobby body, Nasscom.

The report, released this month, has compared Indian companies across sectors with their global peers in terms of digital maturity, noting that much more needs to be done and challenges such as non-uniform connectivity and scarcity of skilled personnel need to be tackled.

Financial Awareness for RBI Grade B-3 August 2017

RBI to release final norms for tri-party repo on corporate bond in August (Source: MINT)

The Reserve Bank of India (RBI) will release final norms for tri-party repo on corporate bonds later this month—a move which is expected to aid market development. Tri-party repo is a type of repo transaction where a third entity called tri-party agent will act as an intermediary.

Increasingly, companies, especially those rated well and non-banking financial institutes, have been fulling their fund requirement through the bond route rather than solely depending on bank loans. Despite this, liquidity and price discovery is the biggest challenge in the bond market, because secondary market trades are far and few due to limited participation by long-term investors such as insurance companies and pension funds.

Hence, other investors are cautious in buying bonds other than top-rated securities in the fear of getting stuck with the security till maturity. Tri-party repo will also pave the way for allowing corporate bonds for RBI’s liquidity adjustment facility (LAF), something the Khan committee had also noted.

Financial Awareness for RBI Grade B-2 August 2017

A number of corporate loans restructured by lenders have seen a decline in the last three financial years, according to the data tabled by finance minister Arun Jaitley in the Rajya Sabha.

Banks restructured loans, that were sanctioned to companies, of worth Rs 3,70,279 crore in FY2014-15 and Rs 2,99,111 crore in 2015-16. The amount of restructured corporate loans came down to Rs 2,04,884 crore in the last financial year, as per the data.

On provision for restructuring of farm loans in case of natural calamities, he said banks can facilitate restructuring, including conversion of short-term debt to term loan or re-schedulement or repayment time-frame to such borrowers with the benefit of retention of asset classification.

Financial Awareness for RBI Grade B-29 July 2017

National Payments Corporation of India (NPCI), the umbrella organization for all retail payment systems in the country, has received the final nod from the Reserve Bank of India (RBI) to function as the Bharat Bill Payment Central Unit and operate the Bharat Bill Payment System (BBPS).

The final clearance from RBI comes almost a year after NPCI launched the BBPS pilot project to make payment of utility bills easier. The pilot started on 31 August with eight BBPS operating units that had received in-principle approval from RBI.

The total number of Bharat Bill Payment Operating Units certified by NPCI now stands at 24. The certified units include three public sector banks (Bank of Baroda, Union Bank of India and Indian Overseas Bank), 10 private sector banks, five cooperative banks and six non-bank biller aggregators.

Financial Awareness for RBI Grade B-27 July 2017

FinMin asks PSBs to work together to hive off consortium loans gone bad (Source: BL)

If public sector banks have collectively given a company a project loan, which then turns sour, they should not break ranks and sell the loan piecemeal to asset reconstruction companies (ARCs), according to the Finance Ministry.

Instead, they should sell the ‘consortium loan’ lock, stock and barrel to an ARC or a consortium of ARCs.

The ministry believes that collectively, public sector banks (PSBs) can realise better pricing on the sale of a project loan given in consortium rather than by doing so singly. A project loan is given by lenders to finance new projects as well as for expansion, diversification and modernisation of existing ones in infrastructure and non-infrastructure sectors.

Financial Awareness for RBI Grade B-26 July 2017

The Reserve Bank of India (RBI) stopped printing Rs 2000 notes about five months ago and is unlikely to print more in the current financial year. About 3.7 billion Rs 2000 notes amounting to Rs 7.4 trillion have been printed so far. That more than compensates for the 6.3 billion Rs 1000 notes that were withdrawn after demonetisation.

Separately, RBI’s printing press in Mysuru has also started printing the new Rs 200 notes, which are likely to come into circulation next month.